Learn To Be A Fix & Flip Investor

Thursday, November 15, 2018

Everything You Need to Know About Getting Loans to Flip Houses

When it's done right, flipping a house is a great way to turn a quick profit and keep yourself out of the dull 9-5 office routine. Of course, most flippers need to procure funds quickly so they can jump on hot properties in a competitive market. Here's how.

At 207,000, 2017 saw the most houses flipped in over a decade. And, with the average return on investment sitting at 49.8%, it's pretty clear that fixing-and-flipping is as hot as ever. This is especially true with high-end housing. Flipped houses valued between $1 million and $2 million shot up by 42%, while those priced between $2 million and $5 million dollars exploded by more than 350%.

So how do you get loans to flip houses? You can go through a bank or broker, but there are some drawbacks to this method. Yes, it's the tried and true way to do it, but getting a bank loan means having a respectable credit score, a healthy balance in the bank, and verifiable income. It also means having your finances scrutinized ad nauseam, which can often take a month or more.

Hard money loans for flipping houses

Another way to do it is to go through a hard money lender. Hard money lenders aren't as worried about how good your credit score is, how much you've got in your bank account, or how much money you've got coming in on a weekly basis. Instead, they're concerned with collateral. If you have assets to put up, you can sit down with a hard money lender, talk about your plans, and conceivably have the funds within 15 days. That flexibility and speed can be the difference you need to get a leg up on the competition in your market.

Is a hard money loan right for your situation?

Hard money loans to flip houses are typically fast and simple if you have assets to put up as collateral. However, they also come with higher interest rates than a traditional bank loan and are usually due within one to five years. That means they're great for people who are experienced flippers; ones who have a better idea of what kind of profit can be made and how fast. They also may work for novices who have hired a seasoned contractor. If you fall into one of those categories and you're interested in getting a loan to flip houses, you may want to sit down with a hard money lender.

Dennis Dahlber Broker Ri CEO Level 4 Funding LLC Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com
Dennis Dahlberg Broker/RI/CEO

About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

How to Find the Perfect Owner Occupied Hard Money Lenders

Did you know that you may be able to qualify for an owner-occupied hard money loan on your primary residence? If you've been denied by the bank or credit union, find out how you can still get funding.

If a bank or credit union has told you that you can't get a loan on a residential mortgage, it might feel like things are hopeless. But banks and credit unions aren't the only lenders out there. Owner-occupied hard money lenders will sometimes offer funds to people who have little or no alternatives. Some of the reasons people might seek out this type of loan include:

● They've been involved in a foreclosure, loan modification, bankruptcy or short sale

● If they have two years or fewer of employment at their current employer

● They don't have a fantastic credit score

● They are self-employed and can't show proof of income

Why it can be difficult to get a owner-occupied loan

Owner-occupied hard money lenders are a rare breed these days, especially in Arizona. Most won't even consider handling an owner-occupied loan for a variety of reasons:

● There's a ton of documentation required

● There are mandated recession periods, so the funding can take longer to go through

● Lenders are often required to get special licensing for these types of loans

● Owner-occupied loans often come with a much greater risk for the lender

But perhaps the most important reason many lenders in Arizona refuse to do owner-occupied hard money loans is the regulations imposed by the Dodd-Frank Act. The Dodd-Frank Act put tight regulations on lenders, requiring them to verify paystubs, W2s, and tax returns to assess the borrower's viability. If they fail to do so, there can be dire consequences from the federal government.

Is an owner-occupied hard money loan right for you?

An owner-occupied private loan may be the best move for people in the following situations:

● Those who need time to repair their credit and not lose their residence

● Those who have been denied a loan at banks and credit unions

● The borrower wants to pay off high-interest debt and doesn't qualify for a 2nd mortgage

● Borrowers with a mandatory waiting period for events like foreclosures and short sales

If the banks and credit unions have turned you down, don't lose hope. An owner-occupied hard money lender in Arizona may be able to help.

Private Money Lenders vs. Banks and Credit Unions

You might be surprised at some of the differences in borrowing from a bank versus borrowing from a private money lender. Let's look at those differences and how they might affect your search for real estate investment funding.

First, let's look at the things that private money lenders and banks have in common. Both will assess the viability of the loan using three main criteria:

The borrower's payment history and credit score
The borrower's capacity to make payments, including income and bank account balance
The borrower's collateral, or any assets that can be put up to secure the loan

Lenders call these the 3 C's — credit, capacity, and collateral. The difference between private money lenders and banks lies in how they evaluate these criteria. Banks are subject to strict regulations imposed by the federal government, so they need borrowers to fit in a very specific box. The borrower needs to have a good job, a clean credit history, and collateral to even get their foot in the door.

What to do when you don't fit in the bank's box

Unfortunately, many people don't fit into this narrow box. Some are self-employed and don't have a regular income history to point to. Others have issues with their credit scores and still others have experienced a bankruptcy, short sale, or foreclosure.

Private money lenders are small business and individuals whose hands aren't as tied as the banks. They have the flexibility to look at each borrower on a case-by-case basis and determine risk. They'll review the 3 C's, but their requirements may be much lower and they may be able to incorporate mitigating circumstances into their considerations. Typically, private money loans are based more on collateral than anything else.

Finding a private money lender in Arizona

Imperfections may not work in the cookie-cutter world of the banks and credit unions, but private loans are more flexible. This is both a bad and a good thing. It's good because it fills in the gap left behind by banks. It's bad because it can make it hard for the average person to find the right lender for their needs. If you've been turned down by a bank or you don't feel you meet their criteria, finding a private money lender in Arizona is simple. In fact, you're already in the right place! Give us a call to see how we can help.

The Advantages of Fix and Flip Loans

Is it really possible to start flipping a house without any money in the bank? Yes, it is, and it might be easier than you think.

For many, the idea of flipping a house seems out of reach. And even seasoned flippers might balk at the idea of tackling a project with no cash on hand. But it's not only possible to start renovations without upfront cash; it's actually fairly quick and simple. Fix and flip loans are designed specifically for real estate investors who want to close on a property quickly, renovate fast, and sell for a profit.

Hard money loans — sometimes called rehab loans — are the most common type of fix and flip loans, and they come with a variety of advantages over traditional funding. Here are a few of them:

They're super fast. Unlike common real estate loans, which can often take up to a couple months to complete, rehab loans can be funded in as few as 15 days. The faster the money is in the account, the faster a flipper can close on that fixer-upper and get started.
Many don't have a prepayment penalty. Some real estate loans come with hidden clauses that penalize the borrower for paying off the debt early. Hard money loans generally don't come with prepayment penalties, so if you turn a property and make money, you can pay off the loan right away without incurring extra fees.
They're not impossible to qualify for. Many lenders want their borrowers to be saints with big paychecks, not a hint of debt, and sparkling clean credit scores. Hard money loans for flippers are generally more interested in the property than the history of the person who's borrowing.

Is a fix and flip loan right for you?

A fix and flip loan may not be right for everyone. Since they require less rigorous requirements and they're shorter-term, they often come with higher rates, and for some, that may be a deal breaker. However, they are right for people who have some previous experience flipping, first-timers who are using a contractor, or flippers who need to make an all-cash offer to compete in the market.

Getting a fix and flip loan

If you're ready to jump on that perfect flip opportunity, speaking with a hard money broker may be your best bet. He or she can outline the pros and cons, give you a competitive rate, and help you qualify.

The benefits and drawbacks of hard money loans

Hard money loans are a fantastic option for some people, but they may not be the right choice for everyone. Here's how to know if a hard money loan is a wise option for your situation.

If you're new to the real estate lending game, you might be wondering what a hard money loan is. Put in simple terms, they are short-term loans — typically anywhere from one to five years — that are an alternative to traditional mortgage loans. There are three main benefits of this type of funding:

They're quicker. For most, securing a loan for real estate is a painfully slow process that requires the borrower to meet a variety of strict requirements. Hard money lenders are less concerned with meticulously verifying every detail of the borrower's finances and more concerned with the collateral. Because of this, the process can move faster and the borrower can jump on that hot property.
They're more flexible. Most hard money lenders don't use the same set-in-stone practices as the mortgage industry. Instead, they focus on cultivating a relationship with the borrower and evaluating each case individually. As a borrower, that flexibility means you can speak to a real person and talk about terms that work best for both parties.
It's easier to get approved. Because most people are using a hard money loan for an investment property, the collateral is the most important factor, not credit scores, income, or financial history. That means if you've got a line on a solid investment opportunity, your financial situation doesn't have to be the deciding factor in your ability to get funding.

Is a hard money loan right for me?

For people who will be able to make a profit fairly quickly on an investment property (think experienced flippers or first-timers working with a contractor), this type of funding is the perfect fit. However, it may not be the right choice for everyone. Because they are quicker and more convenient, they often come with higher rates than a traditional mortgage and may include origination fees.

Finding a hard money investor

To get your hands on the money you need to grab up that perfect property, you may want to speak with a hard money investor. He or she can sit down with you, help you understand your options, and find you terms that will work best for you.

The ins and outs of Arizona hard money lending

What exactly is Arizona hard money lending? Does it differ from what you can get at a bank? Here are the answers you'll need to move forward in your search for funding.

If you're interested in investing in real estate, you've probably come across the term "hard money lending." But what exactly is it and how is it different from just going to a bank and getting approved for a loan? Hard money loans and loans from banks differ in a range of ways, from how you qualify for them to how much you can borrow and how fast your funds will come through.

Getting a traditional bank loan can be an arduous process. You'll have to prove that you have a healthy income, a good financial situation, and an almost unblemished credit report. On top of that, the bank will dig into your past to determine if you're worthy of receiving funding. All of this paperwork and digging can be time-consuming, too; and time is a valuable commodity in the real estate investment world.

How hard money loans differ from bank loans

Unlike a common bank loan, hard money lending is asset-based. This means the typical hard money lender is more concerned with collateral than your credit score, income, or financial standing. The collateral provides security — if the borrower is unable to pay, the collateral can be used instead. Because your life doesn't have to be scrutinized with a fine-toothed comb and there's no complex underwriting involved, hard money loans can go through much quicker. Even better, they can be secured by people with less-than-perfect credit (and even those dealing with bankruptcy).

How to know if a hard money loan is right for you

A hard money loan may not be right for everyone. They generally come at a higher interest rate than a bank loan and the terms are usually shorter; anywhere from one year to five years. Hard money may be the perfect fit for other investors, however. This includes people who don't have ideal credit, people who need to move quickly on a property, and people who have assets that will cover the loan should they not be able to pay it back. To put it succinctly, hard money loans are perfect for investors who want to purchase, improve, renovate, and construct with the idea of turning a relatively quick profit.

Learn To Be A Fix & Flip Investor

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